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Download Article Advances in Economics, Business and Management Research, volume 38 Trends of Technologies and Innovations in Economic and Social Studies (TTIESS 2017) Assessment of effects of property taxes imposed on small and medium enterprises in Irkutsk oblast Galyautdinov Ildus Ilyasovich Institute of Economics, Management and Law, Irkutsk National Research Technical University Irkutsk, Russia [email protected] Abstract—The article describes the results of the three-year inclusive institutes because only those enterprises whose research on possible economic and social effects of the changes in property rights are protected will perform investment activities the Act of Irkutsk oblast “On the property tax” on small and and increase labor productivity. Businessmen who believe that medium businesses of Irkutsk, Angarsk, Bodaybo, Usolye- everything they earn will be stolen, expropriated or taxed Sibirskoe, Sayansk, Tulun and Shelekhov. The article shows the heavily have no incentive to work, never mind investment and dependence of property tax rates and the number of small innovation activities. However, it is important to protect enterprises which will be forced to go out of business or to go property rights of both sides - the economic elite and general into a shadow economy. It was found that the maximum property public. tax rate of 2 % proposed by the Government of Irkutsk oblast will have negative effects on the regional economy, increase the Thus, one can argue that the statement about the fatality of number of the unemployed, decrease investment attractiveness the property tax of 2% in Irkutsk regional law has been taken and yield a reverse effect. Tax revenues of the regional budget into account. On the other hand, fears that the tax will be will decrease rather than increase. If the tax rate is 0,2%, tax imposed on all property items fallen within the purview of the effects will be less destructive, but can also have negative impacts. law irrespective of the property floor area have panned out Negative effects of the property tax depend on the floor area of earlier than expected. Since January 1, 2018, all property 2 properties. If the size is more than 5000 m , there will be no items having cadastral numbers will fall within the purview of negative effects. It is shown that initiators of the regional law the law irrespective of their floor area. A year earlier, only disregard existing tax and quasi-tax pressure on enterprises property items with a floor area of more than 1000 m2 were which puts the brakes on their development. taxable. Keywords—taxes, property, small enterprises, business activity. During this short period until the beginning of 2018, it is necessary to determine the tax rate which, on the one hand, I. INTRODUCTION would contribute to regional and municipal budget replenishment and, on the other hand, would not do much In 2015, the author published the results of my research on harm to SMEs. possible economic and social effects of the changes in the Act of Irkutsk oblast on “On the property tax” on small and In [1], it was proved that the tax rate of 0.1% would force medium enterprises (SMEs) [1]. That article justified a thesis 5 percent of SMEs to go out of business. Those SMEs might statement about the fatality of the tax rate of 2 percent of the go out of business without adopting the law because of their cadastral property value for most SMEs owning facilities with sad state. The tax rate of 0.4 % would force 60 percent of a floor area of less than 1000 m2. SMEs to go out of business. The tax rate of 1.3% would force all SMEs to go out of business. This issue was being discussed by the general public involving regional lawmakers, government agents, Hence the question arises whether these calculations are representatives of noncommercial associations of businesses. relevant for the regional economy of the end of 2017. Is it It was being discussed by participants of scientific conferences possible to determine the tax rate which would solve a double held by Irkutsk National Research Technical University. In task in 2018 - ensuring budget replenishment and preventing November 2015, the debate was broadcasted live. As a result businesses from being shut down? The present article attempts of violent disputes, the law of Irkutsk oblast was adopted in its to answer these questions. first reading without increasing the tax rate which is still at issue. During public debates, representatives of Irkutsk Government put forward arguments for the maximum tax rate Public disputes are good news as they bear witness of of 2% arguing that it is not fatal for SMEs while their developing inclusive economic institutes in Russia. According reluctance to pay larger tax bills is only due to their greed. to some fundamental researches, inclusive economic institutes That approach (businesses should be hard controlled and their (as distinct from extractive ones) contribute to the economic complaints should be disregarded) is typical for Irkutsk region growth, increase labor productivity and prosperity [16]. and Russia as a whole. “Protected private property rights are a key element of the Copyright © 2017, the Authors. Published by Atlantis Press. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/). 197 Advances in Economics, Business and Management Research, volume 38 The well-known extract taken from the work by a British and Administrative Offences Codes were adopted [3]. For four publisher and a labor leader Thomas Josef Dunning and cited and a half years, the volume of the Criminal Code increased by Carl Marx in his “Capital: Critique of political economy” by 28%, the volume of the Administrative Offences Code - by (Volume I. Chapter XXIV “The primary accumulation of 44%, the volume of the Criminal Procedure Code – by 9%. All capital”, Part 7 “The accumulation of capital”), is deeply these amendments are of incriminating nature. Humans are embedded into the thinking of some public officials: Capital is referred to as violators, offenders and thieves. said by Quarterly Reviewer to fly turbulence and strife, and to be timid, which is very true; but this is very incompletely People are afraid of starting business because there is a stating the question. Capital eschews no profit, or very small number of methods to initiate a criminal case against them. profit, just as Nature was formerly said to abhor a vacuum. Russia ranks third by the number of prisoners, tenth - by the With adequate profit, capital is very bold. A certain 10 per number of prisoners per 100 000 of the national population, cent will ensure its employment anywhere; 20 per cent will and second - among the largest countries. However it ranks 50th place by the human development index (education, certainly produce eagerness; 50 per cent - positive audacity; th 100 per cent will make it ready to trample on all human laws; medicine, welfare) [3] and 129 place by the life expectancy 300 per cent and there is neither a crime at which it will index followed by African nations [4]. In 2016, 200 000 criminal cases on economic crimes were being pended [14]. scruple, nor a risk it will not run, even in case its owner being hanged. If turbulence and strife will bring a profit, it will However, at the federal legislative level, one can observe freely encourage both. Smuggling and the slave-trade have some attempts to modify that oppressive situation. Public amply proved all that is here stated (T.J. Dunning, cit., pp. 35, officials began to understand that economic development of 36)”. Russia and growth in Russia’s citizens’ prosperity depend on In the Czarist-era, only a trading license is authorized to the level of business development. The Federal Act no 436-FZ carry out commercial activities. The Acts on Trading Taxes of December 19, 2016 amended Article 299 of the Criminal (1863-1865) and on State Business Tax (1898) prescribed the Code and Article 151 of the Criminal Procedure Code. The procedure of issuing trading documents. The entrepreneurs amendments are provided for severe punishment for themselves determined a guild and a category of their shops falsification of criminal cases against businessmen. and had a trading license of a certain guild. It is similar to the The Act aims at strengthening punishment for illegal uniform tax on imputed income (UTII) calculated and paid by criminal prosecution. It increased the maximum prison term businessmen depending on taxation objects. for that crime from five to seven years of imprisonment. The Did all entrepreneurs of the Czarist era pay their taxes in a same crime, associated with the accusation of a person of fair way? Unfortunately, they did not. According to the audit committing a grave crime or an especially grave crime, findings, in 1882 more than a quarter of commercial and is punishable by ten years of imprisonment. The same industrial institutions of Yenisei and Kansk districts carried punishment is provided for illegal criminal prosecution aimed out uncontrolled activities [10]. at stopping business activities from mercenary or other personal motives. The description uncontrolled can mean not only illegal. As an example, one can use the case of N.G. Gadalov, a Kansk According to the amendments in the Criminal Procedure entrepreneur. In 1888, he dealt with textiles, grocery and Code, investigation into the cases on the crimes stipulated in wholesaling. For wholesaling, he used a stone building Article 169 of the Criminal Code “Preventing from legal consisting of two rooms with two towers. In front of the business activities” was carried out by the Investigation building, there was a sheltered space where he kept barrels Committee of the Russian Federation.
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